US Audit Inspections Permitted in Europe
US audit regulators will now be able to inspect European firms, in a move which is been seen as good news for Lehman Brothers’ investigators as they may now be able to follow up with their leads in London.
The European Commission has cleared the way for US audit regulators to access confidential papers. The Commission has said that audit watchdogs in the USA and Australia can now inspect internal working documents. The move solves the problem that had arisen between EU and US authorities over sharing of confidential papers pertaining to audit reports which are usually retained by audit regulators when they inspect firms.
The European Commission has said in a statement that international cooperation was called for as auditing has spread beyond national borders and that the move was “necessary to ensure that high quality audits are carried out worldwide”.
Previously, the European Commission refused to provide access to US audit inspectors because the feeling was that the US was blocking its access to internal inspection documents.
With the passing of the US financial reform bill, the access to the inspection documents was made free. This led to the move by the EU to green light US inspection of European audit firms.
The EC internal market and services commissioner, Michel Barnier said: “The exchange of audit working papers is an important step in moving towards our ultimate objective of equivalent rules and mutual reliance on each other’s audit oversight systems.”
The PCAOB (Public Companies Accounting Oversight Board), which is the US audit regulator, will now be able to inspect the audits of BHP Billiton, Barclays, Vodafone, HSBC and BT.
The PCAOB has not confirmed or denied whether it is or it will be investigating Ernst & Young’s audit of Lehman’, as is their policy.